I have seen this create confusion within USCIS. If submitting an IRS transcript, there is no need to include any W2's/1099's as that information is included in the transcript, but since he included a copy of his W2 in the RFE response, USCIS appears to be looking for a copy of the return (1040, 1040A, or 1040EZ) that was submitted to the IRS which is not the same as the transcript from the IRS. I know, it doesn't make any sense, but that can come from a bureaucracy. I agree with @Demise, file the I290B with the copy of the 1040 form submitted, or start the I485 all over again (I would do the I290B it it were me).
As to the denial, it is more about not responding to an RFE properly at least according to USCIS. Generally speaking, if an RFE is issued, that is the petitioner's/beneficiary's chance to correct a mistake in a petition, if that is not correctly done, the case is denied, and USCIS moves on.
Good Luck!